Spend on consultancy

The chief secretary to the Treasury Danny Alexander may have pledged that health would be protected from the 25 per cent departmental spending cuts this autumn, but it is abundantly clear that “efficiency savings” are still right at the top of the NHS agenda.

Talk of cost cutting in the Health Service is rife, from David Nicholson’s tough NHS savings target of £15-20bn between 2011 and 2014, to top billing at the recent British Medical Association conference.

The spotlight has swung to the NHS’ spend on management consultancy. Is cutting consultancy spend an easy way to save money? What are the short, medium and long-term consequences of doing without consultancy support?

According to a recent MCA report, the NHS spent £300m on consultancy in 2008, less than 1 per cent of its annual budget and comparatively far less per employee than typical large private sector organisations. While consultants can be more expensive and are easier to shed than permanent staff, they are a critical and unique element of the public sector resource mix. They are needed to support programmes that are delivering essential service change and improved quality for patients. Plus, in times of spending constraint, their skills, experience and objectivity can be highly valuable in driving reform, innovation and cost base transformation.

So, instead of simply making arbitrary cuts to consulting spend, how can health save money without losing the essential skills consultants bring?

Here are five top tips:

1. Be clear on your strategy and objectives

As expounded by management guru Stephen Covey, always “begin with the end in mind”. Review the strategic landscape and ensure you have the right objectives and priorities. For example, in the current health IT context, a strategy might be to move from a few “big-bang’ projects to a portfolio of short, medium and long-term projects with a better payback profile.

2. Optimise your resource mix to best meet your objectives

Having balanced your programme commitments, understand the full range of resource/contract options you have at your disposal and optimise this to best meet your objectives within cost constraints. Know when to use consultants, hire interim or contract staff (who fulfil a very different need) and when to do in-house. It is generally true that you get what you pay for so don’t skimp when you need expert advice, but don’t over-specify on quality when it is core business. Optimally matching resourcing to tasks provides the best way of driving out cost while managing the performance risk.

3. When choosing consultants, it pays to do your homework

Avoid an automatic preference for large global firms; their frequent focus on “land and expand” can be at odds with the NHS’s efficiency imperatives. Instead, leverage the wealth of smaller, specialist firms who do not carry the same global price premium. This may require more research but in turning to a suitable public sector procurement framework – for example the new MCAS Buying Solutions framework – much of this legwork has already been done for you.

4. Ensure you manage your consultants well

The biggest barrier to your consultant’s success is you and your organisation. Put in place effective performance management with a tenacious focus on the outcomes and benefits from consulting programmes. If you want your consultant to ‘super deliver’, help them by speeding up your investment decision-making processes – measure timeliness in weeks not months, in months not years and reduce complexity (while learning to live with more ambiguity). Seek innovative commercial reward mechanisms: if payment by results can be used for medical procedures, is there an opportunity to do something similar with your management consultants?

5. Make sure your consultants know when to leave

Always be clear with your consultants about their scope of work. Consultants can always find something else to work on in your organisation. Ensure they stick to the knitting and tell them when they have done well/ badly, and when it is time to leave. The best ones will automatically ask for your feedback, and will always seek to under stay their welcome.

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